A FREEHOLD standalone shophouse block along Sultan Gate in the Kampong Glam area has just been awarded for S$20.8 million following an expression of interest exercise that closed recently.
Located near the corner of Sultan Gate and Pahang Street, the cluster of shophouses bears three addresses - Nos 32, 34 and 34A Sultan Gate. The part two-storey and part one-storey property is on a single land lot of 7,401 sq ft zoned commercial. The entire property is currently tenanted to a bistro operator at a monthly rent of S$40,000 under a lease that expires in September.
The new owner is not expected to renew the lease as it is said to be planning to operate its own food and beverage concept on the lower level, although it could lease out the upper level to a non-competing F&B operator. The lower level has a floor area of 5,643 sq ft (inclusive of an outdoor area) and the upper level, 2,301 sq ft - resulting in a total floor area of 7,944 sq ft. There is potential to add a roof terrace at the rear of the upper floor.
The S$20.8 million price at which the buyer has entered into a deal reflects S$2,618 per square foot based on the total floor area.
The seller is believed to be Olympia Development, a unit of Chee Tat Holdings, controlled by the Ng family that developed Textile Centre and Serene Centre.
Cushman & Wakefield found the buyer. It jointly marketed the property with Historical Land through an expression of interest (EOI) exercise that closed last week.
Shaun Poh, executive director, capital markets at Cushman & Wakefield, confirmed the transaction when contacted but declined to identify the buyer and seller. He highlighted the rarity value of a standalone shophouse block. Moreover, while it is located in the Kampong Glam Conservation Area, the property is not within the core conservation area, which means there are less restrictions on its use.
The premises have been approved for restaurant use and an outdoor refreshment area under temporary permission which is renewable.
This was the second EOI for the property conducted by the two agents. The first, launched in March last year, had an indicative pricing of S$28 million. The initial exercise generated "quite strong response but most people shied away due to the asking price", said Mr Poh. "With the owner lowering their expectations, we received four bids this time and the award was made to the highest bidder, who had also offered the best terms, that is, with least conditions."
After Chinese New Year, there has been a "little spike" in interest in shophouse properties in the S$10-40 million range from Singaporeans as well as foreigners, Mr Poh observed. Some of these investors have switched from the residential sector to the commercial sector. "Shophouses that are on full-commercial zoned sites are easier to rent out. Usually the ground floor can be leased to F&B outlets; and the upper floor for F&B or offices."
According to CBRE's analysis of URA Realis data, 16 caveats have been lodged for shophouses so far this year (as at March 10) totalling S$119 million. This is not counting the Sultan Gate deal. For the whole of last year, 112 caveats were lodged amounting to S$606 million - down from 206 caveats amounting to S$1.27 billion in 2013. CBRE's analysis covered only shophouses on sites zoned for commercial use.
Source: Business Times, 12 Mar 2015